A Transforming Industry: Applied Materials Merges with TEL

A Transforming Industry: Applied Materials Merges with TEL

By Denny McGuirk, president and CEO, SEMI

Denny McGuirkLast week’s blockbuster announcement of the merger between Tokyo Electron, or TEL, and Applied Materials struck me like two good friends who’ve surprisingly revealed they were getting married: we are certainly happy for them, but know this will have significant impact on our shared circle of associates, colleagues and partners.  Three of the principals in the deal — Tetsuro Higashi, Tetsuo Tsuneishi, and Mike Splinter — will serve as the new company’s chairman and vice chairmen, respectively,  are also SEMI Board members who have taken extremely active leadership roles in the association.  Gary Dickerson, Applied Materials’ president and CEO, and an industry veteran of 30 years, will be the CEO of the new company.

The merger announcement is a milestone in our industry and underscores several important trends.  Unlike any other industry, many of the key technologies needed to sustain industry growth and meet the targets identified by Moore’s Law have been developed and delivered by key equipment and material suppliers.   In many ways, the announcement is the culmination of the unique historical importance of SEMI members and semiconductor supply chain in delivering the advanced technology necessary to enable today’s amazing products including computers, mobile phones and tablets, cloud computing, artificial intelligence, health and medical electronics, and other marvels of modern life. Since Applied and TEL were founded in the 1960’s, they have been at the forefront of the electronics revolution, providing the critical process technology needed to make the next generation chip.  Without them, and other SEMI member companies, there would be no Moore’s Law, no affordable Smart Phones, big screen TVs, or tablet computers. Today, the proposed new company would be bigger than all but the very largest semiconductor companies and as visible, essential, and vital to our modern connected world as any of the top technology brands.

Another important trend the merger underscores is the continued maturation and consolidation of the industry: there are fewer large suppliers serving increasingly fewer leading-edge chip companies. These trends are not unique to the semiconductor and display industries; there are also fewer banks, automotive companies, airlines, telecoms, and drug makers to name a few.  In our industry, the R&D resources needed to develop the process and manufacturing technologies needed by the next generation chip are enormous and one of the primary drivers towards industry consolidation. Pooling R&D resources through merger and other means is a natural and necessary requirement to sustain Moore’s Law.  The microelectronics supply chain, however, remains extremely large, diverse and specialized.  SEMI has approximately 1,800 members providing a variety of equipment, materials, technologies and solutions for multiple industries. Over 85 percent of these companies achieve annual revenues less than $25 million. Now more than ever, these companies see the large equipment and materials companies as their primary customer and SEMI is increasingly expanding our collaboration activities among and within the supply chain.

The final trend worth noting is globalization.  The semiconductor industry has been one of the most global industries on the planet for many years, but the Applied-TEL union signals an unprecedented vision for conducting international business.  The combined organization will have a new name, dual headquarters in Tokyo and Santa Clara, a dual listing on the Tokyo Stock Exchange and NASDAQ, and be incorporated in the Netherlands. The new company will have a shared leadership team. The board will be made up of eleven directors with five directors appointed by each company and one additional director to be mutually agreed upon.   Gary Dickerson, CEO of the new entity, will move to Tokyo to oversee the integration.  The new organization will be a model for corporate globalization and a benchmark for every company seeking to optimize international business organization.  For every company looking to serve the global semiconductor industry, the Applied-TEL alliance will set a high standard for execution and excellence and “pervasive presence” to which even the smallest company should aspire.

Finally, on a personal note, Applied Materials and Tokyo Electron have been providing valuable leadership for our industry for decades in the areas of public policy, standards, industry roadmaps, environmental stewardship and EHS, industry collaboration and other areas.  Mike Splinter, Tsuneishi-san and Higashi-san have provided active, hands-on guidance, counsel and support of SEMI programs and services.  This support has been invaluable to the association and to the entire industry.  We look forward to their continued support and wish them, their employees and associates well in this ambitious, historic new venture.

October 1, 2013